KUALA LUMPUR: Eco World Development Bhd (EcoWorld)'s recent acquisition of land in Semenyih, Selangor from the Boustead Group is a strategic addition to its landbank, according to Public Investment Bank Bhd (PublicInvest).
"With land cost estimated at about 16 per cent of the estimated gross development value (GDV) of RM4.6 billion, the acquisition price appears to be fair in our view, with land cost normally averaging about 15 per cent to 20 per cent currently," PublicInvest said in a note.
The property developer disclosed its participation in a request for proposal by Boustead Properties Bhd (BProp) for several agreements to develop 342.8 hectares over 10 parcels of freehold land.
EcoWorld's 81 per cent-owned subsidiary, Mutiara Balau Sdn Bhd (MBSB), entered into two conditional sale and purchase agreements to acquire the land for RM742.4 million in cash from Boustead Plantations Bhd and Boustead Palau Sdn Bhd, BProp's sister companies, according to EcoWorld's filing on Thursday.
Additionally, EcoWorld and BProp signed a shareholders' agreement to outline their relationship as shareholders of MBSB, granting BProp a put option to require EcoWorld to acquire its 19 per cent stake in MBSB for RM147.62 million, exercisable one year and three months after the completion of the land acquisitions.
The new land, known as Eco Forest 2, is planned as a mixed residential and commercial development.
"We believe that the new land fits in strategically to the group's landbank as it is situated in proximity to its successful townships such as Eco Forest and Eco Majestic," PublicInvest said.
Eco Majestic was launched in 2014 and is the first EcoWorld township in Klang Valley, conceptualised as a gated and guarded community for upgraders.
Meanwhile, Eco Forest was unveiled in 2017, catering to first-time homebuyers.
Together, they span 1,566 acres with RM5.2 billion in cumulated sales recorded as at Aug 31, 2024.
"Currently 28 per cent of its land in that area is still undeveloped, mainly earmarked for commercial development," PublicInvest said.
The research firm has maintained its 'Neutral' call on Eco World, with a target price of RM1.50.
"Currently, it has close to 9,000 acres of landbank in the Klang Valley, Iskandar Malaysia, and Penang, with total GDV exceeding RM80 billion.
"As for funding, we believe it should have no problem financing it with more borrowings or internal funds," it said.
PublicInvest noted that as of July 31, 2024, Eco World had a net gearing ratio of just 0.21 times, with cash reserves of around RM1.55 billion.